Trenton's global finance big shot But can even it save public pensions?

It’s an unlikely setting for market transactions of global scale and consequence.

But there it is, a more than $72-billion colossus nine floors up at 50 West State St., Trenton — the N.J. Investment Division.

Nearby in one direction is the Statehouse, in the other boarded-up buildings and low-end stores struggling to hang in there.

The Investment Division, a low-profile outpost of the state Treasury Deptartment, manages the billions in employe contributions and state appropriations to five state-administered retirement plans for public employees, including teachers and police.

While City Hall a short walk down the street scrapes for funds to patch potholes and maintain a shrinking police force amid gang crime, the Investment Division tends to an enviable stock portfolio topped by the likes of Apple, Microsoft and Exxon.

There’s nothing small or parochial about this govermental version of Warren Buffett.

Due to the magnitude of the funds it oversees — 12th largest such in America, 37th largest in the world — the division’s decisions ripple across oceans and continents, impinging on the global economy, even on international affairs.

A 16-member council including financial and union representative governs the division. The division director is Tim Walsh, a former Montreal and Boston banker and director of investment for the Indiana teachers retirement fund.

New Jersey’s pension system encompasses some 800,000 public employees and retirees. The two biggest retirement plans are the Teachers Annuity and Pension Fund with market-valued assets of $27.6 billion, and the Public Employees Retirement System, which includes state and local public employees, with assets of $25.17 billion.

The total $72-billion-plus assets of all the plans in the system rank it ahead of such monster corporate retirement systems as those of Boeing, AT&T, Verizon and Ford.

When the division culls its holdings in companies found to have business ties to Iran, the Supreme Council of mullahs in Tehran likely takes notice, maybe even winces.

The culling takes place on an ongoing basis, as required by state law. In 2012, the division unloaded Iran-linked investments for $264.7 million in “net sales proceeds.” Since 2008, divestment net proceeds have totalled $914.3 million from unloaded Iran-linked stock involving some 20 foreign businesses. These figures, Treasury offficials say, don’t represent money made on the dumped stocks over original purchase price, but the amount of the sales minus commissions and fees.

The division also screens out investments in companies with business interests in the Sudan. A research consultant, I.W. Financial of Portland, Maine, ferrets out the ties for the division. (The consultant has been paid around $27,000 so far this year.)

Yet, can even such impressive wealth, plus the clout that comes with that wealth, alone rescue New Jersey’s foundering public-sector pension system and prevent it from taking the rest of state finances down with it?

Doubts abound in financial circles — even though the Investment Div. boasts of being among the national leaders in returns earned and in minimizing fees paid out (the division manages 75 percent of its investments itself).

In a semi-hushed sort of way, Gov. Christie is among the doubters, officially speaking. Usually, when he addresses the topic of public pensions, it’s to note unprecedented cost-reducing measures he persuaded a Democratic legislature to support over heated union opposition. These measures forced higher employe contributions, coupled with state pledges to kick in bigger appropriations to the system.

But in the fine print of a recent state bond prospectus, the Christie administration acknowledged that due to still-escalating pension obligations, the state conceivably might not be able in future years to meet the appropriations it promised as a key part of the pension rescue effort.

The administration says the acknowledgement was legally cautious language calculated to protect the state from potential liability regarding full disclosure on bond issues. The governor in fact has earmarked the largest single-year appropriation ever to the public pension system in his budget now pending before the legislature — $1.67 billion.

Yet pension funding shortages loom large for the future. The pension system’s future “unfunded liabilities” — promises to pay with no present means to make good on those promises — rose from $41.76 billion in fiscal 2011 to $47.6 billion a year later, according to the calculations of actuarial numbers crunchers. (Some numbers crunchers say this figure is four times or so larger if private-sector accounting methods are applied.)

To close this gap even at the lower figure will require larger and larger annual appropriations at a time when public employe medical coverage contracts face even larger unfunded future liabilities than pensions. Further complicating matters, New Jersey’s Medicaid obligations are soaring (from $6.1 billion in fiscal 2000 to $12.1 billion in 2012). Some estimates including those of the State Budget Crisis Task Force see $200 billion of future red ink when backlogged public works projects (roads, bridges, etc.) are added to the gargantuan pension and medical costs. This group, focusing on the finances of six states including New Jersey, is headed by Paul Volker. former Federal Reserve chief in the Reagan era, and Richard Ravitch, financial guru and former New York City deputy mayor.

New Jersey has some of the highest taxes (income, sales, corporation) in the nation. Nevertheless, according to another task force expert, Richard Keevey, former director of the N.J. Office of Management and Budget, “We’re on a track that revenues will not match expenditures in the long run.”

So even the state Investment Div. with the wind of a bull market at its back may be overmatched by this challenge. But then, so might even King Midas be.